Iran Parliament Slashes Budget for Petrol Imports

Alireza Ronaghi, Reuters:

Iran's parliament on Wednesday slashed the budget for importing gasoline, seeking to hasten the expansion of the oil refining sector and reverse a dependence on imports of transport fuel.

The populist government of President Mahmoud Ahmadinejad wants to avoid prices hikes in essential goods such as fuel and tabled $4 billion for gasoline imports in its budget plan for the year to March 2007, which was presented last month.

But Mohammad Mehdi Mofatteh of the parliament's budget committee told state television that parliament was cutting that "by limiting the gasoline import budget to $2.5 billion."

Despite being the world's fourth biggest crude exporter, Iran is heavily dependent on gasoline imports because of its lack of refining capacity and buys in more than 40 percent of the 70 million litres it burns each day. READ MORE

Iran's ability to refine its own gasoline is also viewed as a vital security issue.

Economic analysts say Tehran could prove highly vulnerable to sanctions on its gasoline imports, if the United Nations takes tough action over Iran's disputed nuclear programme.

Tehran denies Western charges it is seeking nuclear arms.

Iran's gasoline imports have in the past been supplied by Swiss-based trader Vitol and India's Reliance.

Official estimates forecast that Iran's gasoline imports will have cost $4.5 billion in the year to March 2006.

Heavily-subsidised petrol, that fetches a meagre 10 cents per litre at the pump, is a major political issue for Iran's conservative government whose supporters lie among the poor.

Cheap gasoline is regarded is a national right, and its wasteful usage contributes to the dense pollution that chokes Iran's biggest cities.

Parliament also urged the oil ministry to upgrade two refineries in the central cities of Arak and Isfahan and build three new ones to raise domestic gasoline production by 55.5 million litres a day.

Mofatteh said this would cost some $5 billion.

"The oil ministry should upgrade the refineries in Isfahan and Arak by March 2009 ... to raise the gasoline production there by 23.5 million litres a day," Mofatteh said.

"The oil ministry also has to build three liquefied gas refineries capable of producing at least 32 million litres of gasoline per day," he added.

Converting natural gas into fuels uses new and expensive technology which has yet to be widely adopted in the global energy sector.

Deputy Oil Minister Hossein Kashefi was quoted in the Kayhan newspaper on Monday saying gasoline output would rise to 120 million litres per day in 2010 from the current 40 million litres.

The parliamentary move to slash import spending down to $2.5 billion must now be approved or rejected by the Guardian Council, Iran's conservative constitutional watchdog.